EconPapers    
Economics at your fingertips  
 

Banking globalization, transmission, and monetary policy autonomy

Linda Goldberg ()

No 640, Staff Reports from Federal Reserve Bank of New York

Abstract: International financial linkages, particularly through global bank flows, generate important questions about the consequences for economic and financial stability, including the ability of countries to conduct autonomous monetary policy. I address the monetary autonomy issue in the context of the international policy trilemma: Countries seek three typically desirable but jointly unattainable objectives?stable exchange rates, free international capital mobility, and monetary policy autonomy oriented toward, and effective at, achieving domestic goals. I argue that global banking entails some features that are distinct from the broad issues of capital market openness captured in existing studies. In principle, if global banks with affiliates in foreign markets can reduce frictions in international capital flows, then the macroeconomic policy trilemma could bind tighter and interest rates will exhibit more co-movement across countries. However, if the information content and stickiness of the claims and services provided are enhanced relative to a benchmark alternative, then global banks can weaken the trilemma rather than enhance it. The result is a prediction of heterogeneous effects on monetary autonomy, tied to the business models of the global banks and whether countries are investment or funding locations for those banks. Empirical tests of the trilemma support this view that global bank effects are heterogeneous and that the primary drivers of monetary autonomy are exchange rate regimes.

Keywords: international transmission; lending channel; liquidity; policy trilemma; bank; monetary policy; global; internal capital markets (search for similar items in EconPapers)
JEL-codes: E44 G32 F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mon and nep-opm
Date: 2013-09-01
Note: For a published version of this report, see Linda S. Goldberg, "Banking Globalization, Transmission, and Monetary Policy Autonomy," Svenges Riksbank Economic Review 3 (November 2013): 161-93.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22) Track citations by RSS feed

Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr640.pdf (application/pdf)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr640.html (text/html)

Related works:
Working Paper: Banking Globalization, Transmission, and Monetary Policy Autonomy (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:640

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Amy Farber ().

 
Page updated 2020-01-17
Handle: RePEc:fip:fednsr:640